Section 434.4 Scope of the OFR Audit/Review or Investigation

Section 434

Section 434.4  Scope of the OFR

Audit/Review or Investigation

a)         The Department reserves the right to conduct audits/reviews,

limited reviews, follow-up reviews and/or investigations of entities that

contract with or are licensed by the Department. The Department may elect to

designate qualified individuals to do this on its behalf when an independent

(non-DCFS) audit is required by law or contract. Outside independent auditors

will be used to conduct audits when an award from an outside funding source

requires an independent certified audit as a condition of the award. Audits/reviews

and investigations shall encompass some or all of the following general

objectives:

1)         an examination of financial transactions, accounts, and

reports, including an evaluation of compliance with applicable laws and

regulations and Department rules.

2)         an evaluation of whether the entity is maintaining effective

control over revenues, expenditures, assets and liabilities.

3)         an examination to verify that financial and cost reports

contain accurate and reliable financial and client service data, and are

presented fairly.

4)         an examination to verify that related party transactions are

properly accounted for and disclosed appropriately.

5)         an examination to verify that funds are used for their stated

purpose as prescribed in the contract with the Department.

6)         an examination to verify that costs and services were

incurred, expended or provided as billed.

b)         A preliminary review of entities may be conducted prior to the

full audit.  The purpose of the preliminary review is to define and limit the

general objectives of the audit so that the audit can be conducted in an

efficient manner.  The preliminary review may encompass a selective review of

financial transactions, accounts, reports, internal controls and compliance

with contract provisions

A preliminary review of entities may be conducted prior to the

full audit.  The purpose of the preliminary review is to define and limit the

general objectives of the audit so that the audit can be conducted in an

efficient manner.  The preliminary review may encompass a selective review of

financial transactions, accounts, reports, internal controls and compliance

with contract provisions.  At the conclusion of this review and based upon the

results, the auditors may:

1)         conduct a full scope audit that encompasses all of the general

objectives.  A full scope audit will be conducted when major internal control

weaknesses or significant deviations from generally accepted accounting

principles are observed during the preliminary review.

2)         conduct a limited scope audit to include only the areas of

observed weaknesses in the entity's recordkeeping or compliance with

contracts.  A limited scope audit will be conducted when weaknesses in internal

controls are observed or minor deviations from generally accepted accounting

principles are observed during the preliminary review.

3)         cancel additional field work if no major areas of weaknesses

are observed in the entity's recordkeeping or compliance with contracts.

c)         In the event that a full or limited scope audit is not

completed, a written report of the results of the preliminary review shall be

prepared and distributed as specified in Section 434.5 of this Part.

d)         Current employees of entities or licensees and/or clients of

the Department will be interviewed as necessary in conjunction with

audits/reviews, limited reviews, and investigations.

e)         The scope of the OFR's audit/review or investigation is not

intended to identify fraud; but when fraud is suspected, the Department

reserves the right to surrender all records pertaining to the audit/review or

investigation to the appropriate law enforcement body without notice to the

entity with whom the Department has the contracts

its/reviews, limited reviews, and investigations.

e)         The scope of the OFR's audit/review or investigation is not

intended to identify fraud; but when fraud is suspected, the Department

reserves the right to surrender all records pertaining to the audit/review or

investigation to the appropriate law enforcement body without notice to the

entity with whom the Department has the contracts.

f)         Follow-up reviews may be conducted when entities have had

major internal control weaknesses identified in the final audit report.  Major

internal control weaknesses include, but are not limited to, the following:

1)         lack of controls over cash accounts or petty cash controls,

2)         lack of control over fixed assets,

3)         noncompliance with recordkeeping contractual requirements,

4)         major deviations from generally accepted accounting principles

in the provider's financial reporting and recordkeeping practices,

5)         major deviations from federal or State law or Department rules

and procedures.